Association Arbitration Award Affirmed

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A Michigan court has considered a challenge to an arbitration award from a proceeding conducted by the Flint Area Association of REALTORS® (“Association”).

The Association arbitrated a commission dispute between Wendy Sabo & Associates (“Challenger”) and American Associates, Inc./Randall Haney (“Prevailing Party”). A number of brokerages had represented a buyer who eventually purchased a property listed by the Challenger.

Following the purchase, the Challenger sought to arbitrate the cooperative commission dispute with the various firms who had represented the buyer. The Association’s arbitration panel ruled in favor of the Prevailing Party and awarded it the cooperative commission. The Challengers then brought a lawsuit challenging the arbitration award. The trial court upheld the award, and the Challenger appealed.

The Michigan Court of Appeals affirmed the trial court’s ruling, determining that the Challenger was questioning the factual findings of the arbitration panel, which is not an appropriate basis for challenging an arbitration award. Michigan’s arbitration act does not allow a court to consider the factual basis for the arbitration panel’s decision and limits review of arbitrations to the following: award was procured by fraud; partiality by the arbitrator, either through corruption or other misconduct; arbitrator exceeded his or her powers; or the arbitrator refused to hear evidence, postpone the hearing, or otherwise conducted the hearing in a way detrimental to one of the parties.

The Challenger argued the arbitration panel had exceeded their powers in making the award to the Prevailing Party. First, the Challenger argued that the panel had not followed existing law in making their decision. The court stated that these are not grounds for challenging an arbitration decision, as a panel’s decision will only be overturned if there is a “manifest disregard of the law.” Since alleged errors of law are not sufficient to overturn an award, the court rejected this argument.

Next, the Challenger argued that it was legally impossible for anyone other than the Challenger to be the “procuring cause” of the sale. The court rejected this argument on two grounds. First, the Challenger misstated the “procuring cause” doctrine, as an individual does not need to complete the sale of the property in order to claim the commission. Second, the Challenger’s arguments were fact-based and courts do not review the factual determinations made by the arbitration panel. Therefore, the court ruled that the Challenger had failed to allege any valid grounds for overturning the arbitration award and so affirmed the trial court.

Sabo & Assoc. v. Amer. Assoc., Inc., No. 10-094088-CZ, 2012 WL 6050358 (Mich. Ct. App. Dec. 4, 2012). [Note: This opinion is not published in an official reporter and therefore should not be cited as authority. Please consult counsel before relying on this opinion].

Editor’s Note: NAR, upon a recommendation of its Legal Action Committee, agreed to provide financial support to the Prevailing Party for its litigation costs in defending the arbitration award.